Basics of the Blockchain operation

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Today, everyone is aware of cryptocurrencies such as Bitcoin and Ethereum. However, they are backed by a unique technology called the blockchain. This is a concept that is becoming more and more popular. What does it mean, and how does it work? Let's figure it out together.

So, what is blockchain?

Blockchain is a distributed ledger that stores information about all transactions on the network. Unlike conventional databases, the blockchain is not stored in one place. It is distributed across many computers, or nodes, located all over the world, thus making the system more resistant to attacks and failures. Such information is stored in blocks that are constantly added to the end of the chain. That's why it's called a blockchain or a chain of blocks.

How does blockchain work?

1. Creating a transaction: When users want to perform a transaction, they send a request to the network. This can be a transfer of cryptocurrency, adding a contract, or any other operation.
2. Transaction verification: Other network participants, called miners, verify this transaction. They use algorithms to ensure the transaction is legitimate and does not duplicate another transaction.
3. Adding to a block: After verifying the transaction, miners add it to a new block. Please note that a block can include multiple transactions.
4. Adding a block to a chain: As soon as a block reaches a certain size or passes a certain amount of time, it is added to the chain. This is done by performing a complex mathematical task called proof-of-work.

Blockchain security

Blockchain uses cryptography to ensure the security of transactions. Each block contains a unique code called a hash. Such a hash is obtained by processing the information in the block. If someone tries to change the information in the block, the hash will change, and all network participants will know about it. Such an approach makes the blockchain resistant to fraud and hacking.

Key advantages of blockchain

Blockchain offers several advantages. Firstly, it is transparency. Since all transactions are recorded and stored in the blockchain, it is easy to track and verify the transaction history. Secondly, it is security. Thanks to cryptography, transactions in the blockchain are protected from fraud and hacking. Thirdly, it is decentralization. Blockchain does not require a central party or intermediary like a bank or government to function. Such a design could revolutionize not only financial transactions but also other areas such as healthcare, law, and education.

Conclusion

Blockchain is a powerful and revolutionary technology that can lead to significant changes in many areas of our lives. By having an understanding of the basics of blockchain, we can consciously approach the use of new technologies and perceive possible changes in society and the economy.

Infographics: Timeline of blockchain development from the moment of its creation to the present day

Blockchain is not just a technology behind cryptocurrencies. This innovation can lead to a new digital revolution while opening up new opportunities for the development of society and the economy.

Test Your Knowledge

1. What is or who are miners?
   a. Users who buy and sell cryptocurrency.
   b. Network participants who verify transactions and add them to the block.
   c. Developers of blockchain software.
2. What element ensures the security of blocks in the blockchain?
   a. Digital signature.
   b. Cryptographic hash.
   c. Password.
3. What is proof-of-work?
   a. The process of verifying the legality of the transaction.
   b. A complex mathematical task that needs to be completed to add a block to the chain.
   c. A unique code that guarantees the security of the information in the block.

Correct answers: 1 b, 2 b, 3 b.